As Chairman of the Board, it is a my pleasure once again to address you with my comments and to submit to you the Company’s Financial Statements and the most important events that occurred during the year that ended on December 31, 2010.

The year 2010, marked by the earthquake that devastated the country in the month of February, was a good year for Watt’s. It is with great pride that I would like to highlight the reaction by the whole company in the face of this event. Our first mission was to set our primary target, to return to productive normality as soon as possible and this was achieved in only a couple of days, despite the significant damages suffered, especially in the Concepción area. In this way we were able to rapidly distribute our portfolio of products throughout the country, placing a special emphasis on the areas most affected and on complying with our principal responsibility of supplying essential food to the largest number of people possible. Obviously, the market stability was also affected and in an environment of significant rises in costs, competition during the rest of the year intensified strongly. Despite this, however, we were able to satisfy the market needs in a rapid and efficient manner, maintaining and increasing our market shares in the main categories in which we participate.

With respect to the earthquake and the devastation it provoked, I would like to add that we signed a cooperation agreement with the San Bernardo Parroquial Hospital through which we contributed funds for the reconstruction of part of its installations destroyed by the earthquake, in addition to providing technical support and food.

With regard to the figures for the year, our total sales amounted to CLP 292,335 million, representing an increase of 6.2% with respect to the year 2009, thanks mainly to the growth in our milk and fruit products.

Net earnings for the year 2010 amounted to CLP 16,072 million, 18% over the previous year. Non-operating income was negatively affected when compared to 2009 by a positive inflation which took us to losses on adjustments of CLP 1,415 million, in relation to the financial borrowings that are adjusted in accordance with the variation in the value of the UF. This loss is compared to the net income of CLP 1,387 million obtained the year before when we had negative inflation.
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An important aspect in the financial area worthy of mention was the sale of nearly 7 million of the Company’s own shares for a total value of CLP 3,135 million. This operation was approved in an Extraordinary Meeting of Shareholders and the resources were used to reduce debt.

I would also like to point out that we had an impeccable start up of our new milk drying tower and cheese shop in Osorno. These investments have brought us significant cost efficiency in milk drying and processing, in addition to the possibility of doubling the sales of these products, both on the local market and in exports.
In the marketing area, we maintained our sights on our key brands and categories just as we have been doing in recent years, in line with our business model. We continued supporting our key brands defined for each one of our various businesses, which permitted us to sustain our position or improve it, despite the greater level of competition we had to face during the year.

In our continuous search for growth that is another important pillar of our business model, the Company acquired the Wasil and Regimel brands, which permitted us to penetrate the canned foods category, both in fruits and vegetables, and to consolidate our share in the jams category.

We also made sure we kept up innovation in a systematic fashion in the development of products and in the way we do things, always seeking the greatest efficiency possible. Thanks to all these actions we have received the acknowledgement as the 9th most innovating company in the country as a result of the first ranking of innovative companies (RIC) carried out by the Universidad del Desarrollo together with the Universidad de Los Andes’ Business School.

On the external front, we continued exporting to our traditional markets of Mexico, Peru, Venezuela, Ecuador, Paraguay, Central America and the Caribbean and we are witnessing the results of the sales office we opened in China, which has established business ties with clients in different countries in Asia to whom we have been exporting dairy cream and cheese. We continue to keep a close eye on all this development despite the challenge implied by a historically low exchange rate.

With respect to our operations abroad, Laive in Peru has maintained its good results and has grown 7% in sales when compared to 2009, achieving a global figure of USD 116 million. With regard to the Argentine subsidiary, Lácteos Conosur, the company managed to increase its sales by 4% when compared to 2009 and to maintain a certain stability in its results despite the difficult economic situation in the country and in the dairy industry.

Our subsidiary, Viña Santa Carolina, just as the entire wine industry, was severely affected by the earthquake. Fortunately, and with the effort of all those involved, it was possible to quickly reestablish a large part of the production. The Company lost significant inventories and suffered serious damages to its installations, all of which were covered by insurance which, to a great extent, has already been paid. There is no doubt that the strength of the Chilean Peso implies a challenge for the wine industry that calls for the generation of a greater productive value and for seeking greater cost efficiency in order to remain competitive.

In short, the year 2010 was a very positive year for Watt’s S.A. We displayed strength and consistency in carrying out our strategy, which finally resulted in excellent financial results for the Company. And, perhaps more important, we were able to comply fully with our responsibility to deliver rapidly the products that all our consumers seek every day to satisfy their multiple food requirements.
On closing this message, I would like, in my name and on behalf of the Board of Directors, to congratulate all the staff of Watt’s S.A. and its subsidiaries in this very difficult year that required so much effort, for representing the key element in the achievement of these results and invite them to maintain this permanent commitment and capability in order to continue to grow profitably.


Fernando Larrain Peña
Chairman, Watt's S.A.